Selling your property? Beware the ticking clock

QUESTION: I’ve recently sold a residential property and understand that I must complete a return within 60 days and pay any tax that I owe. Is there any way around having to do this?

ANSWER: If you’ve sold a residential property in the UK that isn’t your main home, there is a ticking clock you need to be aware of.

Since April 2020, HMRC has required individuals to report and pay capital gains tax on most residential property disposals within 60 days of the completion date. But there’s an important exception that could offer some breathing space.

When you sell a property that results in a taxable gain, you are required to complete a capital gains tax on UK property return within 60 days. This return includes details of the disposal, the gain, and any reliefs or losses being claimed. You must also pay the estimated CGT liability within the same 60-day period.

This rule was introduced to help HMRC collect tax more promptly and to reduce the risk of non-compliance. Prior to 2020, most gains were simply reported on the self-assessment tax return due the following January after the tax year ended. The new system means you could be facing a significant tax payment just weeks after the sale.

But there is one scenario where the 60-day deadline no longer applies. If you are already registered for self-assessment and you submit your personal tax return within 60 days of the property sale, then you do not need to file the separate property return.

Even better, the due date for payment of CGT is then extended to the standard self-assessment payment deadline which is January 31 following the end of the tax year.

This exception can be particularly useful if the sale occurs late in the tax year, say in February or March. In that case, you may be able to complete your personal tax return almost immediately after the tax year ends on April 5 and effectively push back your CGT payment deadline by several months – legitimately.

It’s crucial to understand that the 60-day rule applies to each property disposal and that penalties and interest apply for late returns or late payment.

Many people have been caught out, especially when selling buy-to-lets or inherited property they didn’t realise would be taxable. Ignorance isn’t a defence in the eyes of HMRC.

If you’re planning to sell a residential property, make sure you get advice early. Keep records of your original purchase, any improvement costs, and all fees related to the sale.

Then, either get your return in within 60 days, or ensure you’re ready to file your personal tax return quickly enough to benefit from the extended payment window.

While the early tax return route can save you time and stress, it’s not always practical or possible especially if you sell early in the tax year. If you are prepared, then you can reap the benefits.

• Shane Martin (shane.martin@aabgroup.com) is tax director at AAB Group Accountants (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.